Looser spending a boon to hospitality industry

Originally published July 23, 2013 at 9:00 pm

Updated July 24, 2013 at 1:24 pm

A server speaks to patrons at Bar Louie restaurant in Chicago. Bar Louie’s newest dishwashers, cooks and servers owe their jobs to U.S. consumers who are spending more at restaurants and other close-to-home activities.

A waitress prepares a patron’s bill at Bar Louie. The hospitality industry is booming lately.

CHICAGO — Katie Nelson, general manager at Bar Louie in the River North neighborhood, recently called the chain’s headquarters with some good news: Business is booming. That bolstered her plea for money to hire 20 employees.

“We’re hiring a ton right now,” Nelson said on a Friday evening as her outdoor patio filled with diners sipping Goose Island Matilda pale ale and munching flatbread pizzas. “Whenever we get new people trained, we still need more.”

Bar Louie’s newest dishwashers, cooks and servers owe their jobs to U.S. consumers who are spending more on dining, amusement parks and other close-to-home activities.

Fresh crews streaming into restaurants from Red Robin Gourmet Burgers to Domino’s Pizza lifted the number of U.S. leisure and hospitality jobs to a record 14.2 million in June, with hiring 80 percent stronger so far this year than in 2012. The sector now accounts for about 10.5 percent of the U.S. workforce, also a record since the government started tracking the jobs in 1939.

Most Read Stories

“We’re definitely seeing that people are coming out more frequently and we’re seeing a growth in transactions,” said Charlie Morrison, chief executive officer of Texas-based Wingstop Restaurants, which this year is adding about 1,000 workers and 70 locations. “This is our best year since the recession.”

The looser spending that’s lubricating date-night bar tabs and higher traffic at casual-dining restaurants also is paying off for investors. So far this year share prices have risen 28 percent at Starbucks, 29 percent at Dunkin’ Brands and 52 percent at Sonic, all outstripping the 19 percent advance in the Standard & Poor’s 500 index.

Sales at U.S. restaurants and bars will reach a record $461.3 billion this year, a 3.8 percent gain from 2012, the National Restaurant Association in Washington, D.C., estimates.

Even with the U.S. unemployment rate stuck above 7 percent for a 55th straight month in June, the economy has regained 6 million jobs in recent years. That’s 6 million more people who can afford to go out, said Michael Montgomery, U.S. economist at IHS Global Insight.

“Discretionary spending is under less stress,” Montgomery said, adding that there’s also less pressure from the price of gasoline, which ended in June about the same as two years earlier. “It was harder for people to find money for food away from home when gasoline prices kept going up.”

That means more jobs for restaurant workers, amusement-park employees and crews at golf courses, all of which count as leisure- and hospitality-industry jobs. The sector added 75,000 employees last month, including 52,000 for food service and drinking places, leading all groups, according to the U.S. Bureau of Labor Statistics (BLS).

“Employment tends to drive a lot of the overall picture for restaurants,” said David Tarantino, a restaurant analyst at Robert W. Baird & Co. People with jobs “don’t necessarily have as much time to cook.”

Domino’s Pizza is putting final touches on its first-ever national hiring week, Patti Wilmot, executive vice president of human resources at the pizza chain, which plans to advertise its hiring week on television and set up tents outside stores with hot slices of pizza and information about the company.

The chain so far this year has hired 3,000 to 3,500 workers at its U.S. corporate-owned locations, which is more than last year, she said

“We could easily add 7,000 team members,” Wilmot said. “Our stores have never been busier.”

It’s a pattern repeated nationwide as chains expand and other restaurants spring up. Some 12,000 new restaurants were added last year, the most since 2007.

Sonic, whose carhops serve food to diners parked in their cars, is adding locations on the West Coast. The Starbucks unit Seattle’s Best Coffee opened 10 drive-thru stores in Texas in May, adding about 150 jobs. Red Robin on July 1 issued a statement seeking to hire 100 workers who agree that, “The sizzle of burgers on the grill is music to your ears,” for a new location in Springfield, about 200 miles southwest of Chicago.

The improving outlook is unleashing bigger spenders, said Scott Rick, an assistant professor of marketing at the University of Michigan Stephen M. Ross School of Business who studies the emotional causes of consumer-financial decisions. He classifies about a quarter of consumers as tightwads who resist spending, and another quarter as spendthrifts, or enthusiastic consumers. The rest of us, Rick says, fall in the middle.

“The spendthrifts are bouncing back” after the last recession, he said. “People are very willing to look for positive signs and they can be influenced even by the idea that they are going to earn more in the future.”

While the number of jobs at restaurants is soaring, the wages trail other industries. The workers in the sector averaged about $13.46 an hour in June, less than the $24.01 average for all workers, according to BLS data. The employees in the entertainment sector also averaged about 26 hours a week, meaning many don’t qualify for benefits.

For now, everyone should benefit from the expansion, said Jon Luther, chairman of Roark Capital’s Arby’s Restaurant and a director at Chili’s owner Brinker International and amusement-park operator Six Flags Entertainment.

“There’s still a work ethic in this country, and extended unemployment only goes so far, and if opportunities come up that are $12 or $13 an hour, people take them” until something higher-paying opens up, Luther said.